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Retirement Calculator Assumptions: Returns, Inflation and Today's Dollars

By the Can I Retire Calc team · Last updated October 30, 2026 · General education, not personal advice

Every retirement calculator, including ours, relies on assumptions about the future. Small changes in those assumptions can change the result a lot, so it helps to understand them.

Expected annual return

This is the average yearly growth you expect on your investments before inflation. Historically, a stock-heavy portfolio has earned more than a bond-heavy one, but with bigger swings. Long-run averages depend heavily on the time period, and the future may differ from the past. Many planners use something around 5% to 7% for a diversified, stock-heavy portfolio and lower for conservative ones.

Real markets never deliver the same return every year. Our calculator shows a cautious and an optimistic scenario (2 percentage points lower and higher than your estimate) so you can see how sensitive your plan is.

Inflation

Inflation is the rate at which prices rise. At 2.5% a year, something that costs $100 today costs about $128 in 10 years and about $164 in 20 years. A common planning assumption is between 2% and 3%, though it has been higher in some periods.

Why we show results in today's dollars

A balance of $1,000,000 in 25 years will buy much less than $1,000,000 does today. To keep results easy to compare, our calculator converts future amounts into today's dollars. If you see a retirement balance of $800,000, you can think of it as having the buying power of $800,000 at today's prices.

The calculator uses what is called the real return, which is your return after inflation. With a 6% return and 2.5% inflation, the real return is about 3.4% (1.06 divided by 1.025, minus 1).

Yearly contribution increase

If you expect your income to rise, you can save more each year. This field lets you raise your monthly contribution by a percentage each year. If you leave it at 0%, your contribution stays the same in dollar terms, which means it quietly shrinks in buying power as prices rise.

Plan-to age

This is how long your money needs to last. Many people choose 90 or 95 because living a long time is the risk you want to plan for. Choosing a lower age makes a plan look better than it may be.

Fees and taxes

Our calculator does not include investment fees or taxes directly. If your investments cost 1% a year in fees, consider lowering your expected return by about 1 percentage point. Because taxes depend on account types and your situation, treat the income shown as before tax, or discuss it with a tax professional.

How to build confidence in your plan

1. Run a base case with your best estimates.
2. Run a cautious case with lower returns, higher inflation and a longer lifespan.
3. If the cautious case still works, you have a comfortable margin. If not, decide which lever (saving more, working longer, spending less) you are willing to pull.

This article is for general educational purposes and is not financial, tax or legal advice. Rules and limits change; confirm details with official sources or a qualified professional. See our Disclaimer.